BILLS DIGEST NO. 107, 2019–20              17 June 2020

Aviation Legislation Amendment (Liability and Insurance) Bill 2020

Juli Tomaras
Law and Bills Digest Section

Date introduced: 13 May 2020

House:  House of Representatives

Portfolio: Infrastructure, Transport and Regional Development

Commencement: A single day to be fixed by proclamation. However, if those amendments do not commence within 6 months of the Bill receiving Royal Assent, then those amendments will be taken to have commenced on the day after that period.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at June 2020.

Purpose of the Bill

The purpose of the Aviation Legislation Amendment (Liability and Insurance) Bill 2020 (the Bill) is to amend the Civil Aviation (Carriers’ Liability) Act 1959 (Carriers’ Liability Act) to:

•       increase the cap on carriers’ liability for death or bodily injury of passengers on domestic flights, as well as the corresponding level of insurance required, to reflect the rate of inflation (from $725,000 to $925,000)[1]

•       increase the liability limit for the destruction or loss of registered baggage (from $900 to $3,000) and non-registered baggage (from $90 to $300).[2]

•       enable the ‘quantum of mandatory insurance to be increased by regulation’[3]

•       create a mechanism to broaden the capture of risks that carriers are required to insure so as to potentially include ‘war risks’ (currently, similar to international air carriage, a domestic carrier is liable for damages sustained by reason of the death of the passenger or any bodily injury suffered by the passenger resulting from an ‘accident’) and

•       make technical amendments clarifying that ‘that carriers, and servants and agents of the carrier, share the same scope of liability’.[4]

It also amends the Air Accidents (Commonwealth Government Liability) Act 1963 (Air Accidents Act) so that Part IV liability limits are apply to the Commonwealth and certain Commonwealth employees in various circumstances.

Background

Most countries have in place dedicated aviation liability arrangements in recognition of the unique risks associated with civil aviation, the desirability of a standardised approach to this issue and the complex task of awarding damages to passengers using domestic civil liability frameworks.

Australia's carriers' liability and insurance arrangements are set out in the Carriers’ Liability Act. The Carriers’ Liability Act gives the force of law to various carrier liability frameworks based on provisions in treaties to which Australia has signed and ratified including:

•       the Montreal Convention (1999).[5] This was implemented in Australia by the Civil Aviation Legislation Amendment (1999 Montreal Convention and Other Measures) Act 2008 and came into effect on the 24 January 2009.[6] The Montreal Convention (given force to in section 9B of the Carriers’ Liability Act) applies to commercial international carriage of persons, baggage and cargo performed by aircraft for reward, between countries which have implemented the Convention

•       the Warsaw Convention (1929) and its amending instruments; the Hague Protocol (1955) (ratified 1959)[7], the Guadalajara Convention (1961)[8] (ratified 1964) and the Montreal Protocol No 4 (1975) (ratified 1998). This Convention signified the commencement of an international framework for the rules of liability governing international carriage of persons, baggage and cargo by aircraft. It is given force to in section 21 of the Carriers’ Liability Act (without the Hague Convention)

•       the Tokyo Convention (1963).[9] Provisions of the Tokyo Convention are implemented by the Crimes (Aviation) Act 1991.

Different liability frameworks apply depending on the origin and destination of travel.

Domestic travel

Part IV of the Carriers’ Liability Act provides a strict liability scheme of compensation for passenger injury or death, as a result of an accident, so far as it is caused by an accident taking place on board an aircraft, or in the course of embarkation or disembarkation.[10] It also covers liability for damage to baggage[11] and air cargo in respect of travel between the states and territories of Australia.[12]

Each of the states has enacted complementary legislation which applies Part IV of the Carriers’ Liability Act to travel within the states.[13] Together, the Commonwealth and state enactments create a national uniform scheme with regard to domestic carriers’ liability.[14]

The Carriers’ Liability Act does not apply to damages suffered by third parties on the ground. ‘Liability arrangements for third party (surface) victims are outlined in the Damage by Aircraft Act 1999 (the DBA Act).’ [15]

Civil Aviation (Carriers' Liability) Review

The Department of Infrastructure, Transport, Regional Development and Communications (the Department of Infrastructure) conducted a review of key aspects of Australia's aviation insurance and liability framework under the Carriers' Liability Act. As part of this review, the (then) Department of Infrastructure, Regional Development and Cities published a discussion paper in July 2018 (Civil Aviation Carriers' Liability) to gather stakeholder views and feedback.[16]

The main focus of the discussion paper was on:

-          updating liability thresholds under the CACL Act.

-          reviewing the Civil Aviation (Carriers' Liability) Regulations 1991.

-          reviewing current insurance exclusions, particularly War Risk.

Following consideration of the responses to the discussion paper and with the current iteration of regulations due to sunset in October 2019, it was proposed the regulations be remade largely in the same form, with updates to liability limits and reflecting modern drafting language and structure.[17]

An Exposure Draft of the updated CACL Regulations was released with a call for submissions by 31 July 2019.

The updated liability limits came into effect on 1 October 2019 in the Civil Aviation (Carriers' Liability) Regulations 2019. These are reflected in the proposed amendments in this Bill.

Committee consideration

Selection of Bills Committee

At its meeting on 13 May 2020, the Senate Selection of Bills Committee determined that the Bill not be referred to any committee for inquiry and report.[18]

Senate Standing Committee for the Scrutiny of Bills

In its Scrutiny Digest 7 of 2020, the Scrutiny of Bills Committee stated that it had no comment on the Bill.[19]

Policy position of non-government parties/independents

At the time of writing, non-government parties and independent members of Parliament do not appear to have commented publicly on the Bill.

Position of major interest groups

At the time of writing, interest groups do not appear to have commented publicly on the Bill.

Financial implications

According to the Explanatory Memorandum, the proposed amendments will have no financial impact.[20]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[21]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights has stated that the Bill does not raise human rights concerns.[22]

Key issues and provisions

Schedule 1 Amendments

Part 1—Liability limits

Air Accidents (Commonwealth Government Liability) Act 1963

The Air Accidents (Commonwealth Government Liability) Act 1963 (Air Accidents Act) is a discrete and dedicated liability framework for air accidents associated with Commonwealth aircraft and/or Commonwealth employees. It was created to address the inadequacies of the Warsaw Convention which has a ‘relatively low compensation cap for death or injury caused by an air accident.’ It did this by ‘extending a damages cap comparable to the framework for domestic flights under Part IV of the Carriers’ Liability Act to victims of air accidents in some circumstances’, and maintain that parity in cap but only where that was done by way of a change in the Regulations.

Part II of the Air Accidents Act deals with carriage of a passenger in aircraft operated by the Commonwealth or a Commonwealth authority,[23] that is not covered by Part IV of the Carriers’ Liability Act 1959.[24] Subsection 8(1) states that there will be a maximum liability of the Commonwealth or a Commonwealth authority in respect of any passenger who dies or experiences an injury as a result of an accident. Paragraph 8(1)(a) specifies that maximum amount while paragraph 8(1)(b) provides that where a higher amount is set by regulation under the Aviation Liability Regulations, then that higher amount shall apply.

Item 1 repeals paragraphs 8(1)(a) and (b) and replaces them with substituted paragraphs to ensure the liability limit is the higher of the amount specified in the Civil Aviation (Carriers’ Liability) Act 1959 or any Regulations made under that Act.

Part II of the Air Accidents Act deals with carriage of a passenger in aircraft not operated by the Commonwealth or a Commonwealth authority.[25] Subsection 14(1) states that there will be a liability limit of the Commonwealth or a Commonwealth authority in respect of any passenger who dies or experiences an injury as a result of an accident. Paragraph 14(1)(a) specifies the liability limit while paragraph 14(1)(b) provides that where a higher amount is set by regulation under the Aviation Liability Regulations, then that higher amount shall apply. Item 2 repeals paragraphs 14(1)(a) and (b) and replaces them with substituted paragraphs to ensure the liability limit is the higher of the amount specified in the Carriers’ Liability Act or any Regulations made under that Act.

Civil Aviation (Carriers’ Liability) Act 1959

Liability limit for death or injury

Subsection 31(1) of the Carriers’ Liability Act provides that there will be a maximum liability for a domestic carrier in respect of any passenger who dies or experiences an injury as a result of an accident.

Item 3 repeals paragraph 31(1)(a) of the Carriers’ Liability Act, which provides for a liability limit of $725,000 and replaces it with a new paragraph that increases the liability amount to $925,000 (as provided under new subsection 31(1AA) (item 7)). If a higher amount is prescribed by Regulation, or if the contract of carriage specified a higher amount, then the higher amount will apply, in accordance with the proposed paragraphs (b), (c) or (d).

Subsection 31(1A) of the Carriers’ Liability Act provides that there will be a maximum liability for an international carrier in respect of any passenger who dies or experiences an injury as a result of an accident.

Item 8 repeals paragraph 31(1A)(a) of the Carriers’ Liability Act, which provides for a liability limit of 260,000 Special Drawing Rights (SDRs)[26] and replaces it with a new paragraph that increases the liability amount to 480,000 SDRs (currently approximately AU$975,000) (as provided under new subsection 31(1AB) (item 12). If a higher amount is prescribed by Regulation, or if the contract of carriage specified a higher amount, then the higher amount will apply, in accordance with the proposed paragraphs (b), (c) or (d).

Liability limit for registered baggage

The liability limit under subsection 31(2) of the Act for claims for damage or loss of checked baggage applicable to domestic carriers and international flights (not covered by certain international agreements) increased from AU$1,600 to AU$3,000.[27] If a higher amount is prescribed by Regulation, then the higher amount shall apply. In relation to unchecked baggage under subsection 31(3), the liability limit has been increased from AU$160 to AU$300.[28] If a higher amount is prescribed by Regulation, then the higher amount shall apply.

Mandatory Insurance

For the purposes of subsection 41C(3)(aa) of the Act, the amount of personal injury indemnity insurance that an Australian air carrier must have in respect of each passenger is proposed to be increased from 260,000 SDRs (approximately AUD$519,676.96) to 480,000 SDRs (approximately AUD$959,403.62). However, if a higher amount is prescribed by Regulation, then the higher amount shall apply.[29]

Part 2—Insurance exclusions

Part IVA of the Carriers’ Liability Act makes it a requirement for carriers to hold, in respect of carriage to which Part IA, II, III or IV applies, sufficient insurance to ensure that compensation within the limits of liability prescribed by the Act will be paid in respect of death or personal injury suffered by passengers on aircraft.[30]

Section 41D provides that an insurer’s liability is not affected by any warranty or exclusion in the contract of insurance or by any breach of the contract of insurance by the carrier, except as prescribed by the Regulations.

Item 27 inserts at the end of section 41D, a new heading which states ‘Regulations may provide for Secretary to determine exclusions’. Under this heading are inserted new subsections which expand the regulation-making power relating to the scope of mandatory insurance that airlines must obtain, by providing that the Secretary may make determinations in relation to permitted exclusions of liability,[31] and for the Secretary to delegate that power to SES employees in the Department.[32]

The Explanatory Memorandum states:

The regulations refer to a range of permitted exclusion clauses, some of which relate to so called “war risks”. This effectively means carriers are not required to obtain insurance against these risks.[33]

The expansion of regulation-making powers under this amendment ‘will enable the regulations to be revised to make war risk insurance mandatory.’[34]

Part 3—Servants and agents

Existing subsection 33(1) provides that if an action in respect of any damage is brought against a servant or agent of a carrier, the servant or agent, if the person is able to prove they acted within the scope of their employment or authority, is entitled to ‘avail themselves of the limits of liability,’ if any, which the carrier would be entitled to invoke under section 31[35] in an action against the carrier in respect of that damage [emphasis added].

Item 28 seeks to clarify that a carrier, and their servants and agents, share the same scope of liability by stipulating that servants and agents of the carrier can avail themselves of the same ‘conditions’ of liability in addition to the ‘limits’ of liability applicable to air carriers.[36]

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[1].              Legal costs are in addition to this liability limit.

[2].              These baggage limits have not been updated since 1994.

[3].              Explanatory Memorandum, Aviation Legislation Amendment (Liability and Insurance) Bill 2020, p. 5.

[4].              Ibid.

[5].              Convention for the Unification of Certain Rules for International Carriage by Air, done at Montreal on 28 May 1999. Ratified in 2008 and effective in 2009. The text of the Montreal Convention is set out in Schedule 5 to the Carriers’ Liability Act.
The Montreal Convention is an international agreement which updates laws relating to carriers' liability. It is designed to replace the complicated and outdated ‘Warsaw System’ of carriers' liability.

[6].              Further information on the Civil Aviation Legislation Amendment (1999 Montreal Convention and Other Measures) Act 2008 is set out in the relevant Bills Digest: J Tomaras, Civil Aviation Legislation Amendment (1999 Montreal Convention and Other Measures) Bill 2008, Bills digest, 99, 2007–08, Parliamentary Library, Canberra, 2008.

[7].              Given force to in section 11 of the Carriers’ Liability Act.

[8].              Given force to in section 25A of the Carriers’ Liability Act.

[9].              Convention on Offences and certain other Acts Committed on board Aircraft, signed in Tokyo on 14 September 1963. Ratified in 1970.

              The Tokyo Convention creates and seeks to mainstream the approach to acts on board aircraft which are offences against penal law, or which may or do jeopardise the safety of aircraft and persons or property on board, or good order and discipline on board. One significant issue regulated by the Tokyo Convention, is that of the immunity (from liability in subsequent proceedings ) of the persons who are authorised by the Convention to take certain measures, for the protection of life and safety in the aircraft.

[10].              M Brooks, ‘Australia to implement Montreal Convention’, Aviation Business Asia Pacific, June/July 2008, p. 39.

[11].              An airline is strictly liable if a passenger’s checked baggage is lost, delayed or damaged, regardless of fault, if the loss or damage airlines took place on board the aircraft or during any period within which the checked baggage was in the charge of the carrier.

[12].              Part IV also covers international airline travel where the Montreal Convention, the Warsaw Convention, the Hague Protocol, the Montreal Protocol No. 4 or the Guadalajara Convention does not apply.

[13].              Department of Infrastructure, Transport, Regional Development and Communications (DITRDC), ‘Air Carriers' Liability and Insurance’, DITRDC website, last updated 24 September 2019.

[14].              Civil Aviation (Carriers’ Liability) Act 1967 (NSW), Civil Aviation (Carriers’ Liability) Act 1964 (Qld), Civil Aviation (Carriers’ Liability) Act 1962 (SA), Civil Aviation (Carriers’ Liability) Act 1963 (Tas), Civil Aviation (Carriers’ Liability) Act 1961 (Vic), Civil Aviation (Carriers’ Liability Act) 1961 (WA).

[15].              DITRDC, ‘Air Carriers' Liability and Insurance’, op. cit.

[16].              Department of Infrastructure, Regional Development and Cities (DIRDC), Civil Aviation Carriers’ Liability: discussion paper, DIRDC, July 2018.

[17].              DITRDC, ‘Air Carriers' Liability and Insurance’, op. cit.

[18].              Selection of Bills Committee, Report, 4, 2020, the Senate, 14 May 2020.

[19].              Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 7, 2020, The Senate, Canberra, 10 June 2020, p. 34.

[20].              Explanatory Memorandum, op. cit., p. 4.

[21].              The Statement of Compatibility with Human Rights can be found at page 5 of the Explanatory Memorandum to the Bill.

[22].              Parliamentary Joint Committee on Human Rights, Human rights scrutiny report, 6, 20 May 2020, p. 21.

[23].              Emphasis added.

[24].              It also does not apply in relation to the death of, or injury to, a person in circumstances entitling any dependent of the person, or the person, to pension under the Veterans’ Entitlements Act 1986.

[25].              Ibid. The passenger is an employee within the meaning of the Commonwealth Employees’ Rehabilitation and Compensation Act 1988 or a person to whom that Act applies as if he or she were such an employee; a seaman to whom the Seamen’s Compensation Act 1911 applies and is travelling in the course of their employment. It does not apply to a person in circumstances entitling any dependent of the person, or the person, to a pension under the Veterans’ Entitlements Act 1986.

[26].              The Special Drawing Right (SDR) is a monetary unit of the International Monetary Fund, which replaced the now obsolete Poincaré gold francs used by the Warsaw system. Section 9 of the Carriers’ Liability Act provides that an Australian court must convert all relevant SDR amounts into Australian dollars, using the exchange rate published by the Reserve Bank of Australia. The value of the Special Drawing Right is calculated by the International Monetary Fund on the basis of a weighted basket of four currencies—US dollar, European euro, Japanese yen and UK pound. The Fund publishes the value of the SDR each day in terms of US dollars; the latest available rate is crossed with the 4.00 pm A$/US$ rate. Source: Reserve Bank of Australia (RBA), Exchange Rates, RBA website.

[27].              Items 13-17.

[28].              Items 18-22.

[29].              Items 23-24.

[30].              Section 41A, Carriers’ Liability Act.

[31].              Proposed subsection 41D(2).

[32].              Proposed subsection 41D(3).

[33].              Explanatory Memorandum, op. cit., p. 3.

[34].              Ibid.

[35].              Section 31 of the Carriers’ Liability Act deals with the limits of liability.

[36].              Proposed subsection 33(1). Examples of provisions dealing with ‘conditions’ of liability are section 28 (Liability of the carrier for death or injury); subsections 29(1) (Liability of the carrier in respect of baggage) and 35(2) (Liability in respect of death); and section 36 (Liability in respect of injury).